10th

Fiscal Period Business Report(Statement of Financial Performance)

June 1, 2010 ~ November 30, 2010

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-office.co.jp/en/

I. Overview of Daiwa Office Investment Corporation

Establish Stable Revenue Base andDaiwa Office Investment Corporation (DOI) is a REIT (real estate investment trust) specializing in investment in officebuildings, focused on the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards). Through aportfolio comprised of A Class buildings (buildings with a total floor area of 30,000m2 or more) and B Class buildings(buildings with a total floor area of 2,000m2 or more, but less than 30,000m2), DOI strives to earn stable revenues bymeeting the diverse needs of a broad range of tenants and flexibly responding to market changes.

In September 2010, the trade name was changed from “DA Office Investment Corporation” to “Daiwa Office Investment
Corporation.” By increasingly leveraging the creditworthiness and network that the Daiwa Securities Group has
acquired over the years, DOI will embark on a new growth stage.

Contents
I.

Overview of Daiwa Office Investment Corporation

II. Asset Management Report ……………………… 16

3 Characteristics of Daiwa Office Investment Corporation /Measures to Embark on a New Stage ……………………… 3

III. Balance Sheets …………………………………… 22

To Our Investors …………………………………………… 4
Financial and Management Highlights ……………………… 5
Internal Growth Measures ………………………………… 6External Growth Measures ………………………………… 8
Financial Conditions …………………………………… 10
Overview of Portfolio (portfolio list) ……………………… 11
Overview of Portfolio (portfolio distribution) ……………… 12
Description of Asset Manager …………………………… 14
Investment Unit and Investor Information………………… 15

2

IV. Statements of Income …………………………… 24
V.

Statements of Changes in Unitholders’ Equity … 25

VI. Notes to Financial Statements ………………… 26
VII. Independent Auditors’ Report ………………… 37
VIII. Statements of Cash Flows [Information Only] … 38
IX. Investor Information ……………………………… 39

Advance to the Next Growth Stage
3 Characteristics of Daiwa Office Investment Corporation
Office Specialized REIT

Office buildings

Applies advanced know-how on
operating office buildings

0%

50%

Five Central Wards of Tokyo
0%

91.3%

50%

100%
Based on acquisition price0

Portfolio comprised of
A Class and B Class buildings
Operates Shinjuku Maynds Tower
at the core and blue-chip medium-sized
office buildings

100%

Regional Cities 1.7%
Greater Tokyo 6.9%

REIT focused on theFive Central Wards of Tokyo
Places priority on owning
office buildings in favorable locations
for which there is high demand

100%

A Class buildings(Shinjuku Maynds Tower)

20

40

48.1%

0%

60

B Class buildings

80

51.9 %

50%

100%
Based on acquisition price(Note) All the percentages in the above graphs are figures as of the end of November 2010.
0

20

40

60

80

Measures to Embark on a New Stage
Growth measures
0・Continue acquiring properties

Achieve asset size of 350 billion yen
at an early stage

・Leverage borrowing capacity

Keep the medium-term, upper-limit
LTV target range within 40%~50%

10

20

30

40

50

60

70

80

Asset size

350

billion yen(medium-term target)

Asset size

278.1
billion yen(as of November 30, 2010)

Further growth ofasset size
Establishment of stable revenue base・Maintain and improve occupancy rate

Strengthen relationships with tenants

・Maintain and improve property value

Capture tenant needs by reinforcing ties
with property managers
Keep renovating to improve
habitability and convenience

・Lower borrowing costs

Increase creditworthinessI. Overview of Daiwa Office Investment Corporation

390

To Our Investors
Aiming for further growth to become one of Japan’s leading REITs

In being elected as Executive Director of Daiwa Office Investment Corporation (DOI) at the 6th General Meeting of Unitholders
held on August 20, 2010, I am committed to devote every effort to the running of DOI in pursuit of DOI’s further growth andmaximizing returns for unitholders. Your guidance and encouragement would be greatly appreciated.
In the 10th Fiscal Period (fiscal period ended November 2010), the trade name was changed from “DA Office Investment
Corporation” to “Daiwa Office Investment Corporation” and the portfolio properties that still bore the former sponsor namewere renamed to new names that begin with “Daiwa.” This enabled DOI to be clearly presented to the market and tenants asa member of the Daiwa Securities Group. By fully leveraging the trust and network that the Daiwa Securities Group has
acquired over the years, DOI will seek to increasingly grow its business going forward.
Concerning performance in the 10th Fiscal Period, in addition to the full absence of rent revenues from a large tenant thatmoved out in the 9th Fiscal Period, free rent (periods free of rent payments) was granted in some contracts with new tenants,
which prevented rent revenues from increasing. Furthermore, the office rental market weakened. The result was a period-onperiod decrease in revenues and decrease in income for a distribution per unit of 3,240 yen.
However, DOI took measures to overcome the challenges in establishing a stable revenue base during the 10th Fiscal Period
and we consider that these are steadily yielding results. “Occupancy rate improvement,” “Property acquisition” and “Costreduction” were the 3 major challenges facing DOI. Concerning occupancy rates, reinforced leasing at Shinjuku Maynds Tower
following the exit of a large tenant proved effective in restoring the occupancy rate to 99.9% and the occupancy rate of theentire portfolio also improved to 95.9%. Moreover, DOI achieved ongoing external growth with the acquisition of Kyodo
Building (Nishi-Shimbashi) for 5.0 billion yen and Kyodo Building (Kudan Ichigo-kan) for 4.0 billion yen, while procuring
unsecured low-cost funds through publicly-offered investment corporation bonds and borrowings.
DOI will pursue new growth ahead in seeking to become one of Japan’s leading REITs by focusing on thenext level of challenges of “Aim to improve contract terms, while maintaining the occupancy rate,”“Enhance revenue-generating capacity by speeding up the pace of property acquisitions” and “Strive to
reduce liabilities costs, while raising the ratio of unsecured liabilities.”
We wish for the continued success of our unitholders and ask for your continued support of DOI.

Kazuo Otaka Executive Director of Daiwa Office Investment Corporation

10th Fiscal Period

Distribution per unit (actual)

3,240 yen

11th Fiscal Period

Distribution per unit (forecast)3,280 yen(fiscal period ended November 2010)(fiscal period ending May 2011)(Note)

4

The forecast on distribution above is calculated based on certain assumptions and may vary due to changes in the status and other factors. Moreover, the forecasts set forth herein should not be construed asa guarantee of distribution amounts.

Financial and Management Highlights
Revenue decreases due to grant of free rent and fall in rent levels,
offsetting positive contribution of new property acquisitions

Occupancy rate

Raised the occupancy rate of Shinjuku Maynds Tower to 99.9%.
Made progress also in the leasing of other properties,
which led to the occupancy rate improving for the entire portfolio to 95.9%.

New property acquisition

Acquired Kyodo Building (Nishi-Shimbashi) for 5.0 billion yen on August 13, 2010.
Acquired Kyodo Building (Kudan Ichigo-kan) for 4.0 billion yen on September 2, 2010.

Financial management

Issued 5.0 billion yen in unsecured investment corporation bonds
through a public offering in June 2010.
Borrowed a total of 5.5 billion yen in new unsecured borrowings in September 2010.

10th Period

9th Period

8th Period

7th Period

6th Period(November 2010)(May 2010)(November 2009)(May 2009)(November 2008)

6,424
2,482
1,274
1,282
395,798
505,4693,240
294,562

6,986
2,959
1,774
2,076
395,798
507,475
5,246
283,867

7,744
3,903
2,711
2,710
395,798
509,075
6,847
286,901

8,178
4,279
2,999
3,157
343,905
558,1139,179
275,769

15,393
11,041
9,343
9,342
343,905
576,099
27,165272,105

28.1

25.5

25.3

25.4

22.0

33
182,548.82
95.9

31
174,928.31
85.7

30
171,951.76
92.8

30
172,135.20
97.7

30
172,429.29
97.6

Operating revenues (million yen)
Operating income (million yen)
Ordinary income (million yen)
Net income (million yen)
Total number of units issued (units)
Net assets per unit (yen)Distribution per unit (yen)Total assets (million yen)
Loan-to-value (LTV)(based on total asset value) (%)
Number of investment properties
Total rentable area (m2)Occupancy rate (%)

Operating Revenues and Net Income

Total Assets(million yen)(million yen)

300,000

20,000Operating revenues

15,00015,393

294,562

Net income

290,000

286,901
283,867

10,000

9,342

8,178

5,000
0

3,157

6th Period

280,000

7,744

7th Period

6,986

6,424

275,769
272,105

270,000

2,710

2,076

8th Period

9th Period

1,282

260,000

10th Period

6th Period

7th Period

8th Period

9th Period

10th Period

Distribution Per Unit and Net Assets Per Unit
(yen)

(yen)

35,00030,000600,000
27,165Distribution per unit (left axis)

576,099

Net assets per unit (right axis)

558,11325,000560,000

20,000540,000

15,000509,075
9,179

10,000

6,847

5,000
0

580,000

6th Period

7th Period

8th Period

507,475
5,246

9th Period

505,469
3,240

10th Period

520,000
500,000
480,000
460,000

I. Overview of Daiwa Office Investment Corporation

5

Internal Growth Measures
Recovery to full occupancy at Shinjuku Maynds Tower
Progress also made in the leasing of other properties, thereby improving the portfolio occupancy rate

Office Market Trends◦ Vacancy Rate and Rent in the Five Central Wards of Tokyo

During the 10th Fiscal Period, Japan’s officebuilding market saw the average vacancy rate
hover at high levels due in part to a standstill inthe domestic economy. With the decline in
office demand slowing down in general, andmoves to increase floor area and new entries
were observed in some areas, which showed agradual recovery trend. On the other hand,
although the decline in market rent in the new
tenant market has slowed down, rent levels
remain on a weak note.

(%)(yen/tsubo)

9.4

19,5009.2
19,0009.0
8.8

18,500

8.6
8.4

18,0008.2
17,500

8.0
7.8
7.4

17,000

Average vacancy rate (left axis)
Market rent (Advertised rent in the Five Central Wards of Tokyo; existing buildings) (right axis)

7.6
Dec.
2009

Jan.
2010

Feb.

Mar.

Apr.

May

June

July

Aug.

Sept.

Oct.

Nov.

16,500Source: Prepared by Daiwa Real Estate Asset Management Co., Ltd. based on data of Miki Shoji Co., Ltd.

9.4

9.2

9.0

8.8

Measures to Improve the Property Value of Shinjuku Maynds Tower

8.6

8.4

8.2

◦ Present State of the Property

8.0• The occupancy rate, which saw a sharp drop in the 9th Fiscal Period, largely improved to full occupancy due to a focus on leasing

7.8• Worked to raise the added value of Shinjuku Maynds Tower through ongoing efforts to alter some outside lighting, upgrade thesurveillance camera system, implement renewal construction, etc.

7.4

• Strengthened relationships with tenants

19500• Held events to enhance tenant satisfaction

19000

18500

◦ Measures to Improve Property Value

18000• Raise the property’s added value, including renewal of basement floor stores and 1F common-use areas• Improve the property value by continuing to implement renewal construction on standard floors

17500• Capture tenant needs and enhance tenant satisfaction through direct communication between the AssetManager and tenants, while reinforcing ties with property managers

17000

16500

• Conserve energy and reduce costs through analysis of energy data
Event at Shinjuku Maynds Tower◦Occupancy Rate of Shinjuku Maynds Tower(%) 100.0

95.0

5

No.

Date of Press
ReleaseReason forMoving in

1

February 1, 2010

Betterlocation

1.5

78.8%

June 25, 2010

Relocation for
expansion

1

81.4%

3

July 20, 2010

Betterlocation

1

84.5%

4

August 31, 2010

Relocation forconsolidation

2

91.0%

October 8, 2010

Relocation for
expansion

2.5

99.4%

2

90.0

4
85.0

3
80.0

2

75.0

5

1

Average for office buildings in the Nishi-Shinjuku area (Note)
Shinjuku Maynds Tower

70.0

6

7.6

Sept.
2008

Nov.

Jan.
2009

Mar.

May

July

Sept.

Nov.

Jan.
2010

Mar.

May

July

Sept.

Nov.
(Note) Source: CB Richard Ellis

No. of Occupancy
FloorsRate

(Note) The forecast figures set forth below are the figures calculated basedon certain terms using information available at the end of the 10th
Fiscal Period. Accordingly, actual results may vary from these figures.

Restructuring of the Leasing Strategy
The portfolio occupancy rate at the end of the 10th Fiscal Period recovered to 95.9% as a result of Shinjuku Maynds Tower’s fulloccupancy and leasing improvement at other properties.  However, rent falls, free rent, etc. caused the NOI yield to drop to 3.2%.  
Hereafter, we plan to shift from a strategy that places top priority on the occupancy rate to one that, while striving to maintain and improve
the occupancy rate, focuses also on improving contract terms.
(%) 100
95
90
85
80
75
70
(million yen) 9,000
8,000
7,000

99.0

97.4

97.0

98.3

98.2

95.9

92.8

94.2

93.4

85.7
Occupancy rate (DOI forecast)Occupancy rate

NOI: Rental revenues + Other revenues related to property leasing− Expenses related to rent business + Depreciation
NOI yield: NOI ÷ Period average acquisition price

7.1

6,000

5.7

5.4

5.2

4.8

5,000

6,895

3,000

5,133

3,974

3,143

3,282

End of
1st Period

End of
2nd Period

6,373

4.5

8
7
5

6,334

5,915

4,922

3.2

3.3

3.4

4,465

4,623

4,743

4
3
2

1,000
0

9 (%)

6

4.8

4.7

3.7

4,000
2,000

97.7

97.6

1
End of
3rd Period

End of
4th Period

End of
5th Period

End of
6th Period

End of
7th Period

End of
8th Period

End of
9th Period

End of
End of
End of10th Period 11th Period 12th Period(forecast)(forecast)0

Properties Targeted for Leasing Improvement◦Daiwa Nihombashi Honcho(%) 100◦ Daiwa Kyobashi(%) 100

88.1

100.0 100.0
84.9

88.1

38.2

Occupancy rate
Occupancy rate (DOI forecast)
6th
7th
8th
9th
10th
11th
12th
Period Period Period Period Period Period Period

0100(forecast) (forecast)• A large tenant vacated the property at the end of April 2010.  This wasfollowed by another tenant vacating the property, resulting in the occupancy
rate at the end of the 9th Fiscal Period dropping to 38.2%.
• Held more property viewings.  Improved leasing in collaboration with leasing
brokers and property managers. The occupancy rate at the end of the 10th
Fiscal Period recovered to 65.2%.

◦Daiwa Ginza 1-chome

Occupancy rate
Occupancy rate (DOI forecast)
9000

80.0

97.4 97.4

90.7
78.9

100

6th
7th
8th
9th
10th
11th
12th
Period Period Period8000
Period Period Period Period(forecast) (forecast)

7000• The occupancy rate at the end of the 11th Fiscal Period is expected to drop to
54.0% due to a main tenant vacating the property. 6000
• Aim for 50recovery in the occupancy rate at the end of 5000
the 12th Fiscal Period
through future leasing improvement, but examine also
the creditworthiness of4000
tenants, contract terms, etc. to focus on capturing stable
3000 tenants.
0

50

0

2000
1000
0

◦ Daiwa Jingumae(%) 100

77.0

54.0

Case Examples of Leasing Activities9(%) 100
97.0

100.0 100.0

100.0

8
7

78.5

78.5

78.5

6

78.9

50

0

100.0

50

50

0

100.0 100.0 100.0

65.2 61.0

550
Occupancy rate
Occupancy rate (DOI forecast)
6th
7th
8th
9th
10th
11th
12th
Period Period Period Period Period Period Period(forecast) (forecast)• A property that had continued to have low occupancy rate.  Common-use
areas and water supply and drainage areas were renewed.
• Achieved lease for 4 floors by responding to existing tenant needs for more
floor area. The occupancy rate at the end of the 10th Fiscal Period recovered
to 97.4%.

1000Occupancy rate
Occupancy rate
(DOI forecast)

4
3
2 0.0

100

6th
7th
8th
9th
10th
11th
12th
1
Period Period Period Period Period Period Period0(forecast) (forecast)• Renewed common-use areas after the tenant that had been renting the entire
building50vacated the property.
• As a result of implementing campaigns and other measures, the occupancyrate, which was 0.0% at the end of the 9th Fiscal Period, recovered to 78.5%
at the end of the 10th Fiscal Period.
0• While examining
the creditworthiness of tenants, contract terms, etc., aim tosecure stable tenants for the remaining floors.
I. Overview of Daiwa Office Investment Corporation

50

0

7

External Growth Measures
Proactively promote external growth by leveraging cash reserves and borrowing capacity

Real Estate Sales Market Trends
In the office sales market, real estate companies’ andfunds’ demand to purchase is recovering thanks toeasing of financial institutions’ lending stance. Several
cases of property purchases by real estate companies
and funds (including REITs) were seen from the first half
to the middle of the 10th Fiscal Period, but the volume ofproperty supply ended the latter half of the 10th Fiscal
Period on a weak note, partly because of more proactive
refinancing by financial institutions.

(transactions)

(DI)

800
300
700
600
500
400
300
200
100
0

No. of transactions

Lending stance DI (real estate)

Lending stance DI (all industries)

Sharp decline in number of transactions
Stricter lending attitude

2007
1st Half

2007
2nd Half

2008
1st Half

2008
2nd Half

2009
1st Half

2009
2nd Half

2010
1st Half

2010
2nd Half

30
20
10
0
-10
-20
-30
-40
-50

Source: Prepared by Daiwa Real Estate Asset Management Co., Ltd. based on data of Urban Research InstituteCorporation's “Real Estate Transaction Survey” and Bank of Japan's website

External Growth Target and Property Acquisition Policy

85.5×25

DOI acquired 2 medium-sized office buildings (Kyodo Building (Nishi-Shimbashi) and Kyodo Building (Kudan Ichigo-kan)) during the 10th Fiscal Period
for a total of 9.0 billion yen.
DOI will continue to proactively promote external growth by leveraging cash reserves and borrowing capacity and increasing acquisition channels.
800
700
600
500
400
300
200
100
0

◦ Medium-Term External Growth Target

Achieve medium-term target of 350 billion yen in total acquisition price at an early stage through proactive
property acquisitions by leveraging borrowing capacity.
◦Distribution of Portfolio Properties and Acquisition Policy

30[Chart of Distribution of Portfolio Properties](Total floor area: m )120,000
2

100,000

80,00060,00040,00020,000

DOI portfolio properties

Investment breakdown
Share
Shinjuku Maynds Tower
Five Central Wards 91.3%
6.9%
Greater Tokyo
1.7%
Regional Cities
AClass
buildings
Presently targeted
ShareClassification
investment zone
A Class buildings 48.1%
Kyodo Building
B Class buildings 51.9%
Area

Acquisition Policy
Focus investment on the Five Central Wards of Tokyo
For the time being, focus investment on relatively new A
Class buildings and relatively new B Class buildings within thetargeted building age range of 20 years or younger ( 1 )Improve stability and profitability of the existing portfolio
through new property acquisitions
Consider also replacement of properties by selling properties
in Zone 2 and purchasing properties in Zone 1

1

B Class buildings
2

0.0

10.0

20.0

30.0

40.0

50.0

10

Investment is concentrated
in the Five Central Wards of Tokyo
0
Comprised of A Class-10building (Shinjuku Maynds Tower) and-20
B Class buildings (Note)-30 are old buildings ( 2 )Some B Class buildings-40-50(Kudan Ichigo-kan)

Kyodo Building(Nishi-Shimbashi)

Present Portfolio20

60.0(Age: years)(Note) A Class buildings are buildings with a total floor area of 30,000m2 or more, and
B Class buildings are buildings with a total floor area of 2,000m2 or more, but less than 30,000m2.

Portfolio History and Market Conditions
350
300

Subprime
mortgagecrisisBullish period(billion yen)

Adjustment period

Expansion period

Total acquisition price
287.0

250

283.4

265.0

265.0

265.0

269.1

278.1

200
150
100
50

79.5

0
IPO
Oct. 2005

8

110.8

End of
1st Period
May 2006

130.4

138.4

End of
2nd Period
Nov. 2006

End of
3rd Period
May 2007

Proactive investment
for future growth
End of
4th Period
Nov. 2007

End of
5th Period
May 2008

End of
6th Period
Nov. 2008

End of
7th Period
May 2009

End of
8th Period
Nov. 2009

End of
9th Period
May 2010

End of10th Period
Nov. 2010

End of11th Period
May 2011

End of12th Period
Nov. 2011

Newly Acquired Properties
DOI acquired the following two properties during the 10th Fiscal Period through the pipeline support to the Asset Manager. The aim going forward isto speed up the pace of property acquisitions by utilizing also the Daiwa Securities Group’s extensive network.

Kyodo Building (Nishi-Shimbashi) [acquired on August 13, 2010]• Located in Tokyo’s Minato Ward in an areawith many medium-sized office buildings• Access to 3 subway stations (Toranomon
Station on the Tokyo Metro Ginza Line,
Kamiyacho Station on the Tokyo Metro
Hibiya Line and Onarimon Station on the
Toei Mita Line)• Has standard competitiveness as it isequipped with the specifications necessary
for use as office space
Line

Ginz

a Lin

e

Soto

a Lin
i Mit
Toe

a-do

◦Revitalization of Surrounding Areas
In the surrounding areas of the Property, aredevelopment project is underway for Loop
Highway 2, which runs from Toranomon to
Shimbashi (commonly known as “McArthur
Road”), as well as for the surrounding areas.
As such, revitalization of the areas surrounding
the Property can be expected in the future.

Lin
usa
sak
To

ei A

Atago Green Hills
Atago Mori Tower

3-chome Nishi-Shimbashi,
Minato-ku, Tokyo
Site area
1,138.26m2
Structure and floors SRC B1/10F
Total floor area
6,913.81m2
Rentable floor area 4,812.19m2
Completion
July 31, 1993
Acquisition price5.00 billion yen
Occupancy
85.5% (as of Nov. 30, 2010)

e

Hibiy

Atago Green Hills
Atago Forest Tower
The Jikei
Universityri

Atago Shrine

Kamiyacho Sta.
Holland Hills
Mori Tower

Shimbashi Sta.

Shimbashi Sta.
Yurikamome
TokaidoShinkansen Line

Kyodo Building(Nishi-Shimbashi)
Toranomon
TowersResidence

-dori

e

yo M

etro

bori

Tok

Hotel Okura
Tokyo

note

etro

ama

Uchisaiwaicho Sta.

yo M

JR Y

Tok

Hibiy

Toranomon
Hospital

Tokyo Expressway

a Lin

e

Toranomon Sta.

Address

Onarimon Sta.

(Note) The Property’s building name is scheduled to bechanged to Daiwa Nishi-Shimbashi.

Kyodo Building (Kudan Ichigo-kan) [acquired on September 2, 2010]• Located in Tokyo’s Chiyoda Ward in anarea with many office buildings• Excellent access to transit a mere 1-minute
walk from Kudanshita Station on the Tokyo
Metro Tozai and Hanzomon Lines and theToei Shinjuku Line
• Enjoys high visibility, and is competitive as
it has undergone renovation work

Address

1-chome Kudan-Minami,
Chiyoda-ku, Tokyo
Site area
540.67m2
Structure and floors SRC 9F
Total floor area
3,679.70m2
Rentable floor area 3,135.95m2
Completion
March 31, 1987
Acquisition price4.00 billion yen
Occupancy
90.7% (as of Nov. 30, 2010)◦ Acquisition of the Property

Kitanomaru
SquareTokyo Universityof Sciencewayn Express
Metropolitaebukuro line)
Route 5 (IkHotel Grand Palace

Senshu University
Daiwa
Jimbochoku
Toei Shinju

Line

Jimbocho Sta.
Kudanshita Sta. Kyodo Building (Kudan Ichigo-kan)

tro
Kudan Post Officeo Me ine National
Showa
Toky zomon L
Aozora Bank Head Office
Han
Memorial Kudan
Museum Kaikan Hall
Chiyoda City OfficeKitanomaru
Park
Tokyo Legal Affairs
Ushigafuchi
Bureaumoat
Nippon Budokan

After Renewal
Renewal of the Property was completed by theseller by the time of acquisition of the Property.
This has enabled competitive leasing activities
to be carried out from the time of purchasedespite its building age being over 20 years.

o
etr
oM e
ky LinTo zaiTo(Note) The Property’s building name is scheduled to bechanged to Daiwa Kudan.

I. Overview of Daiwa Office Investment Corporation

9

Financial Conditions
Promote stable fund procurement for property acquisitions by leveraging borrowing capacity

Financial Strategy
DOI has a strong ﬁnancial base that is backed by thecreditworthiness of the Daiwa Securities Group. DOI
will increase cash reserves, as well as conduct
stable fund procurement by leveraging borrowing
capacity based on low LTV, to support future growth.

◦ Targets of the Financial Strategy
1. Medium-term, upper-limit LTV shall be within the range of 40%~50%(LTV target for the near future shall be 35%)
2. Aggregate amount of interest-bearing liabilities that are to become due in a single
ﬁscal period shall be no more than 20 billion yen
3. Long-term liabilities shall be no less than 60%~70% of total liabilities
4. Lenders shall be diversiﬁed, centering on domestic ﬁnancial institutions

Increase in Ratio of Unsecured Funds◦Summary of Unsecured Fund Procurement During the 10th Fiscal Period

DOI issues unsecured investment corporation
bonds and newly draws down unsecured
borrowings. In addition, DOI takes various
means, such as considering procuring
unsecured funds for reﬁnancing borrowings thatare to become due for redemption, in an aim toincrease the ratio of unsecured fundprocurement.

Name
Second Series Unsecured
Investment Corporation Bonds

Total Issue AmountIssue Date

Term to Maturity

Interest Rate

5,000 million yen

June 24, 2010

3 years

1.870%

Loan Amount

Drawdown Date

Loan Period

Interest Rate

Shinsei Bank, Ltd.

Lender2,000 million yen

Sept. 2, 2010

2 years 11 months

TIBOR+0.90%

The Bank of Fukuoka, Ltd.

2,000 million yen

Sept. 30, 2010

3 years

TIBOR+0.85%

ORIX Trust and Banking Corporation 1,500 million yen

Sept. 30, 2010

3 years

TIBOR+0.85%(Note) TIBOR stands for Tokyo Inter-Bank Offered Rate

Status of Interest-Bearing Liabilities◦Interest-Bearing Liabilities
80.0 (%)(billion yen) 200.0
Interest-bearing liabilities amount
150.0

100.0

54.4

54.0

52.2
Medium-term, upper-limit LTV target range of 40%~50%[LTV target for the near future]

50.0
60.3
0.0

LTV (based on acquisition price)

60.8

59.0

154.9

147.8

22.6

84.1

77.0

59.7

26.4

27.4

26.9

70.0

72.5

72.4

29.8

82.7

70.0

◦ Ratio of Long- to
Short-Term Liabilities(as of November 30, 2010)

60.0

Investment
corporation
bonds

50.0

10.3%

Current portionof long-termborrowings

17.2%

40.0
30.0
20.0
10.0

End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
1st Period 2nd Period 3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period 10th Period

0.0Long-term borrowings

72.5%

200

◦Diversiﬁcation of Repayment Dates (as of November 30, 2010)(million yen) 30,000

150
Pledged repayment installments

125
25,000Aozora Bank(secured)

15,00050
Shinsei Bank(secured)0

ORIX Trust and Banking(unsecured)

19,600

41
3,925

2,000
1,500
2,000

133
3,500

10,000

3,000
5,000

10

(as of November 30, 2010)100

20,0000◦Ratio of Fixed- to
Floating-Rate Borrowings

133

125
2,000

5,500

5,000

13,243
7,100

5,481

5,000

10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period

30000

Bank of Fukuoka(unsecured)

Floating
interest

Fixedinterest

48.3%

43.1%

Shinsei Bank
(unsecured)
Second Series
Unsecured Investment
Corporation Bonds

3,500

Floating interest(capped)28th Period

8.6%

Overview of Portfolio (portfolio list)
DOI has a portfolio comprised of one A Class building and 32 B Class buildings(as of November 30, 2010)
Address

Property Name

Rentable
Area (m2)(Note 2)

Structure andExecution
No. of Floors Completion of Major
Repairs(Note 3)Acquisition
Price
mm
yen

Appraisal
Value at End
of Period

Ownership TypePML (%)

Share(mm yen)(Note 4)Land

Building(Note 5)

Five Central Wards of Tokyo (Note 1)

1 Daiwa Ginza

Ginza, Chuo-ku, Tokyo

8,273.46 SRC B3/12F

July 1963

2003

14,1005.1

14,000Fee simple andleaseholdFee simple

9.2

2 Daiwa Ginza Annex

Ginza, Chuo-ku, Tokyo

2,032.52

SRC B3/8F

Aug. 1972

2003

3,050

1.1

2,920

Fee simple

Fee simple

7.5

3 Daiwa Shibaura

Shibaura, Minato-ku, Tokyo

9,626.16 SRC B1/12F

Oct. 1987

8,265

3.0

7,087

Fee simple

Fee simple

5.1

4 Daiwa Minami-Aoyama

Minami Aoyama, Minato-ku, Tokyo

2,715.54 S·SRC B2/5F

Sept. 1990

4,550

1.6

4,000

Fee simple

Fee simple

12.8

5 Daiwa Sarugakucho

Sarugakucho, Chiyoda-ku, Tokyo

3,657.43

June 1985

3,000

1.1

3,350

Hamamatsucho, Minato-ku, Tokyo

3,671.25 SRC B2/10F

July 1993

2,865

1.0

2,854

LeaseholdFee simple
Fee simple Compartmentalized
ownership

9.8

6 Daiwa A Hamamatsucho
7 Daiwa Jingumae

Jingumae, Shibuya-ku, Tokyo

2,198.61

Dec. 1997

2,800

1.0

2,010

Fee simple

Fee simple

12.0

8 Daiwa Shibadaimon

Shibadaimon, Minato-ku, Tokyo

2,384.70 SRC·RC B1/7F Nov. 1996

2,578

0.9

2,789

Fee simple

Fee simple

3.0

9 Daiwa Misakicho

Misakicho, Chiyoda-ku, Tokyo

2,137.53

S 8F

July 1996

2,346

0.8

2,398

Fee simple

Fee simple

6.7

10 Daiwa Shimbashi 510

Shimbashi, Minato-ku, Tokyo

2,803.80

SRC B1/8F

Apr. 1974

2,080

0.7

2,540

Fee simple

Fee simple

8.1

11 BPS SQUARE

Tsukiji, Chuo-ku, Tokyo

2,852.97

SRC 10F

Jan. 1996

1,560

0.6

1,660

Fee simple

Fee simple

7.7

12 Daiwa Tsukiji

Tsukiji, Chuo-ku, Tokyo

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.4

1,370

Fee simple

Fee simple

9.7

13 Daiwa Tsukiji 616

Tsukiji, Chuo-ku, Tokyo

2,932.65

SRC B1/9F

Mar. 1994

2,440

0.9

2,410

Fee simple

Fee simple

7.7

14 Daiwa Tsukishima

Tsukishima, Chuo-ku, Tokyo

8,426.85

S 5F

July 1996

7,840

2.8

7,720

Fee simple

Fee simple

10.9

15 Nihombashi MS Bldg.

Nihombashi-Horidomecho, Chuo-ku, Tokyo

2,920.19

SRC B2/7F

Apr. 1993

2,520

0.9

2,430

Fee simple

Fee simple

7.8

16 Daiwa Azabudai

Azabudai, Minato-ku, Tokyo

1,705.44

SRC B2/9F

Apr. 1984

1,600

0.6

1,830

Fee simple

Fee simple

9.6

17 Daiwa Shibuya SS

Shibuya, Shibuya-ku, Tokyo

2,980.92 SRC·S B1/9F

July 1977

2003

3,930

1.4

3,950

Fee simple Compartmentalized
ownership (100%)

18 Daiwa Nihombashi Honcho

Nihombashi-Honcho, Chuo-ku, Tokyo

7,419.75 SRC B1/10F

Jan. 1964

2006

7,420

2.7

7,360

Fee simple

Fee simple

8.5

19 Daiwa Ginza 1-chome

Ginza, Chuo-ku, Tokyo

3,757.77 SRC B2/11F

Jan. 1962

2005

4,620

1.7

4,310

Fee simple

Fee simple

10.2

20 Daiwa Kyobashi

Hachobori, Chuo-ku, Tokyo

3,220.47

SRC B1/8F

Oct. 1974

2005

3,460

1.2

3,350

Kojimachi, Chiyoda-ku, Tokyo

2,405.15

SRC B2/9F

Oct. 1987

2,680

1.0

2,360

22 Daiwa Onarimon

Shimbashi, Minato-ku, Tokyo

11,615.37

SRC 9F

Apr. 1973

13,8605.0

14,600Fee simple Compartmentalized
ownership (100%)
Co-ownership Compartmentalized
ownership
Fee simple Compartmentalized
ownership (100%)

10.0

21 Sunline Building No. 7

106,000

Co-ownership

Co-ownership6.4

Fee simple

3.1

SRC 8FRC B1/4F

23 Shinjuku Maynds Tower (Note 7) Yoyogi, Shibuya-ku, Tokyo

45,544.04 S·SRC B3/34F Sept. 1995

24 SHIBUYA EDGE

Udagawacho, Shibuya-ku, Tokyo

2,480.65

25 Daiwa Kodenmacho

Nihombashi-Odenmacho, Chuo-ku, Tokyo

2,379.31

26 Daiwa Jimbocho

Kanda Jimbocho, Chiyoda-ku, Tokyo

3,166.84

2006

2003

133,800 48.1

8.7

8.6
5.5

RC B1/9F

Aug. 2006

5,900

2.1

4,130

Fee simple

SRC 8F

Mar. 1985

2,460

0.9

1,920

Fee simple andleaseholdFee simple

7.7

S B1/8F

Mar. 1997

4,150

1.5

4,340

Fee simple

Fee simple

5.6

Fee simple

6.8

27 Kyodo Building (Nishi-Shimbashi) Nishi-Shimbashi, Minato-ku, Tokyo

4,812.20 SRC B1/10F

July 1993

5,000

1.8

5,720

Fee simple

28 Kyodo Building (Kudan Ichigo-kan) Kudan Minami, Chiyoda-ku, Tokyo

3,104.23

Mar. 1987

4,000

1.4

4,240

Fee simple Compartmentalized
ownership (100%)

Subtotal

6.0

SRC 9F

254,114

152,713.62

8.0

223,648

Greater Tokyo Area (Note 1)

14.9

29 Daiwa Kinshicho

Kameido, Koto-ku, Tokyo

5,468.85

30 Daiwa Higashi-Ikebukuro

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,630.94 SRC·S B1/9F

31 Benex S-3
32 Daiwa Shinagawa North

Jan. 1992

3,653

1.3

3,587

Fee simple

Fee simple

7.4

June 1993

2,958

1.1

3,414

Fee simple

Fee simple

5.6

Shin-Yokohama, Kohoku-ku, Yokohama City, Kanagawa

7,470.28 S·SRC B1/12F Feb. 1994

4,950

1.8

3,410

Fee simple

Fee simple

5.7

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,551.31 SRC B1/11F

7,710

2.8

5,770

Fee simple

Fee simple

5.6

Fee simple

Fee simple

11.6

Subtotal

S B1/5F

July 1991

19,271

24,121.38

16,181

Regional Cities (Note 1)

33 Daiwa Minami-Semba

Minami-Semba, Chuo-ku, Osaka City, Osaka

5,713.82

SRC B1/8F

Sept. 1986

4,810

1.7

3,030

Subtotal

5,713.82

4,810

3,030

Total

182,548.82

278,195

242,859

5.6 (Note 6)(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo Prefectures), Nagoya area (Aichi and Mie Prefectures), ordinance designated cities (Sapporo, Sendai, Niigata, Shizuoka, Hamamatsu, Okayama,
Hiroshima, Kita Kyushu and Fukuoka), and the cities of Hakodate, Asahikawa, Aomori, Morioka, Akita, Koriyama, Iwaki, Utsunomiya, Toyama, Kanazawa, Nagano, Gifu, Otsu, Nara, Wakayama, Kurashiki,
Fukuyama, Shimonoseki, Takamatsu, Matsuyama, Kochi, Kurume, Nagasaki, Kumamoto, Oita, Miyazaki and Kagoshima.
(Note 2) The entries for Rentable Area are as of November 30, 2010 (end of 10th Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of November 30, 2010 (end of 10th Fiscal Period).
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (January 2011) prepared by NKSJ Risk Management, Inc. and rounded to the first decimal place.
(Note 6) The PML total shows the portfolio PML.
(Note 7) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total Rentable area of the entire building.

I. Overview of Daiwa Office Investment Corporation 11

Overview of Portfolio (portfolio distribution)
DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku
and Shibuya Wards)(Building names were changed in the 10th Fiscal Period in accordance with our branding strategy)

Main investment area:
Five Central Wards of Tokyo
Focused investment area:
Greater Tokyo Area
Ikebukuro

Toshima-ku

2 Daiwa Ginza Annex

3 Daiwa Shibaura

Shinjuku-ku
Shinjuku

Shinjuku Maynds Tower 23

Shibuya-ku
1 Daiwa Ginza

5 Daiwa Sarugakucho

Daiwa Jingumae 7

6 Daiwa A Hamamatsucho

Daiwa Minami-Aoyama 4
Daiwa
Shibuya SS

SHIBUYA EDGE 24
Shibuya17Tokyo
7 Daiwa Jingumae

8 Daiwa Shibadaimon

9 Daiwa Misakicho

10 Daiwa Shimbashi 510

Shinagawa-ku

12

11 BPS SQUARE

12 Daiwa Tsukiji

13 Daiwa Tsukiji 616

16 Daiwa Azabudai

17 Daiwa Shibuya SS

19 Daiwa Ginza 1-chome

21 Sunline Building No. 7

25 Daiwa Kodenmacho

26 Daiwa Jimbocho

27 Kyodo Building (Nishi-Shimbashi)

28 Kyodo Building (Kudan Ichigo-kan)

29 Daiwa Kinshicho

30 Daiwa Higashi-Ikebukuro

31 Benex S-3

32 Daiwa Shinagawa North

33 Daiwa Minami-Semba

30

Daiwa Higashi-Ikebukuro
4 Daiwa Minami-Aoyama

15 Nihombashi MS Bldg

Daiwa Misakicho
9

5 Daiwa Sarugakucho
Kinshicho
KameidoDaiwa Jimbocho
Kyodo Building(Kudan Ichigo-kan)
25 Daiwa Kodenmacho
29
Daiwa Kinshicho
15 Nihombashi MS Bldg.
Chiyoda-ku
21 Sunline Building No. 7
18 Daiwa Nihombashi HonchoTokyo
Daiwa Tsukiji
Chuo-ku
Koto-ku
BPS SQUARE
Daiwa Ginza Annex
19 20 Daiwa Kyobashi
Daiwa Ginza 1-chome
2
12
Kyodo Building
1
11
Daiwa Ginza(Nishi-Shimbashi)
27
13 Daiwa Tsukiji 616
10
22
14
ShimbashiDaiwa Tsukishima
Daiwa Onarimon
6
Daiwa Shimbashi 510
8
16
Daiwa A Hamamatsucho
Daiwa Azabudai
Daiwa Shibadaimon
3 Daiwa Shibaura
Minato-ku
28

26

JR Yamanote Line
JR Saikyo Line
JR Chuo Line

Shinagawa
32 Daiwa Shinagawa North

14 Daiwa Tsukishima

18 Daiwa Nihombashi Honcho

20 Daiwa Kyobashi

22 Daiwa Onarimon

24 SHIBUYA EDGE

JR Yokosuka Line andSobu Rapid Line

31
33

Benex S-3
Daiwa Minami-Semba

23 Shinjuku Maynds Tower

I. Overview of Daiwa Office Investment Corporation 13

Description of Asset Manager
Daiwa Real Estate Asset Management promotes steady asset management by executing a high degreeof professionalism, maximizing the branding power and credibility of the Daiwa Securities Group

Organization of Asset Manager (as of February 1, 2011)◦Description◦Directors and Auditor

Name

Daiwa Real Estate Asset Management Co., Ltd.

President and Representative Director

Akira Yamanouchi

Address

6-2-1 Ginza, Chuo-ku, Tokyo

Vice President and Representative Director

Yoshiki Nishigaki (Head of Advisory Dept.)

Established

October 21, 2004

Vice President and Representative Director

Yuji Shinozuka (Head of Business Planning Dept.)

Paid-in Capital

200 million yen

Director

Atsuko Takahashi(Head of Investment Management Dept.)

President and Representative Director Akira Yamanouchi
Directors

9 (6 executives, 2 non-executives, 1 auditor)

Director

Naoyuki Owa (Head of Administrative Dept.)

Employees

32

Director

Yoji Ueda (Head of Finance Dept.)

Registration of Financial Instruments
No. 355 (Kinsho), Director-General, Kanto Local Finance Bureau
Business Operator

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Hikaru Sakagami

Building Lots and Buildings
Transaction Business License

No. (2)-83920, Governor of Tokyo

Auditor

Shigeharu Tominaga

Discretionary Agent for Real
Estate Transaction Approval

No. 34, Minister of Land, Infrastructure, Transport and Tourism

Association Membership

Member of The Investment Trusts Association, Japan
Member of Japan Securities Investment Advisers Association◦Organizational Chart

Shareholders’ Meeting
Auditors
Board of Directors

Compliance Committee
Investment Committee

Compliance Officer
President and Representative Director
Internal Control Office

Investment Management Department

Administrative Department

Business Planning Department

Acquisitions Team

Operation of DOI’s General
Meeting of Unitholders andBoard of Directors
Operation of General Meeting of
Shareholders, Board of
Directors and Committees
Labor and human resources
matters
Submission of applications forvarious permits, licenses,
approvals, registrations, etc.
stipulated by laws andregulations

Analysis of real estate market
and retail industry trends
Research and analysis of realestate investment trust market
Matters relating to thedevelopment of medium-term
asset management plans andannual asset management
plans
Development and revision of theInvestment Guidelines
Overseeing of DOI’s risk
management

Asset acquisition and disposal
Formulation of investment
policies

Asset Management Team
Asset leasing and management
Formulation of asset leasing
and management policies

Investment Planning Team
Budget and performance
management of portfolio

Finance Department

Advisory Department

Finance and IR Team

Matters relating to advisoryconcerning formulation of
replacement plans or income andexpense plans for customers’
assetsMatters relating to advisoryconcerning disposal of customers’
assetsMatters relating to advisoryconcerning management,
operation, leasing andmaintenance and renovation ofcustomers’ assets
Matters relating to reporting andother duties being conducted forinvestors of private funds

Matters relating to financing
and asset liability management(general management of assets
and liabilities)
Formulation of IR strategies

Accounting TeamManagement of budget andperformance
Matters relating to financial
results and accounting

Support System Backed by Sponsor Cooperation
Sponsor Support

100% ownership
Sponsor support agreement
Asset
management
contract
Asset Manager

Daiwa Real Estate
Asset Management
Instruction

Property Management
Companies

14

Management
contract

Optimal application of financial market
know-how possessedby Daiwa Securities Group

Daiwa Securities
Group Inc.
13.1% ownership
Investment Corporation

Borrowings

Daiwa Office
Investment Corporation

Interest

Listed on TSE REIT Market
Code: 8976

Manager of Unitholder Registry, etc.
Special account management institution

Chuo-Mitsui
Trust and Banking

General Administrator
Asset Custodian

Investment
Distributions

Sumitomo
Trust and Banking

Financial institutions

Individual investors
Institutional investors

Investment Unit and Investor Information
DOI’s investment unit price is holding steadyHistory of Investment Unit Price(yen) 400,000
Investment unit price (left axis)

Trading volume (right axis)

350,000
300,000
250,000
200,000
150,000

6,000 (units)

100,000

4,000

50,000

2,000

0
2008
Dec.

0
2009
Jan. Feb.

Mar.

Apr.

May

June

July

Aug. Sept.

Oct.

2010
Dec. Jan. Feb.

Nov.

Mar.

Apr.

May

June

July

Aug. Sept.

Oct.

Nov.

Overview of Investment Units and Unitholders (as of November 30, 2010)
146×57

Individuals/others 39,658 units (10.0%)
No. of investment
units by investor type
Total:

Financial institutions 125,707 units (31.8%)

395,798 units

Other domestic
corporations 133,033 units (33.6%)
Securities firms 53,495 units (13.5%)
Other domestic corporations 207 (1.6%)
Financial institutions 24 (0.2%)

No. of unitholders
by investor type
Total:

Foreigners 43,905 units (11.1%)

Individuals/others 12,577 (97.1%)

12,953Foreigners 124 (1.0%)
Securities firms 21 (0.2%)

0

Top Ten Unitholders (as of November 30, 2010)
Name of Investor

Number of Units Owned

Percentage Share

1.

K.K. Columbus

68,905 units

17.4%

2.

Daiwa PI Partners Co. Ltd.

60,000 units

15.2%

3.

Daiwa Securities Group Inc.

4.

Japan Trustee Services Bank, Ltd. (trust account)

5.

The Nomura Trust and Banking Co., Ltd. (investment trust account)

6.

Trust & Custody Services Bank, Ltd. (securities investment trust account)

7.

Goldman Sachs International

8.

The Master Trust Bank of Japan, Ltd. (trust account)

9.

0

20

The Fuji Fire and Marine Insurance Co., Ltd.

10. Deutsche Bank AG London-PB Non-Treaty Clients 613

40

51,893 units

60

80

13.1%

16000

48,078 units

14000

35,542 units

9.0%

23,450 units

5.9%

7,803 units

2.0%

7,695 units

1.9%

5,599 units

1.4%

5,100 units

1.3%

12000
10000
8000
6000
4000
2000
0

12.2%

100

Note: The percentage share figures are rounded to the first decimal place.

I. Overview of Daiwa Office Investment Corporation 15

II.

Asset Management Report

1. Management Status and Other Performance Highlights of DOI
Settlement Period(1) Operating Performance
Operating revenues
Rental revenues
Operating expenses
Property-related expenses
Operating income
Ordinary income
Net income(2) Properties, etc. (as of end of period)
Total assets[period-on-period percentage change]
Interest-bearing liabilities
Net assets[period-on-period percentage change]
Unitholders’ capital(3) Distributions
Total distribution amount
Dividend payout(4) Per Unit Information
Total number of units issued (units)
Net assets per unit (yen)Distribution per unit (yen)Distribution amount from earnings per unit (yen)Distribution amount in excess of earnings per unit
(5) Financial Indicators
ROA[annual rate]
ROE[annual rate]
Capital ratio[period-on-period basis points change]
LTV (loan to value)
Property leasing cash flows (NOI)(6) Other Referential Information
Number of investment properties
Number of tenants
Total rentable area (m2)Occupancy rate
Depreciation
Capital expenditures(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)16(

10th Period
From June 1, 2010
To Nov. 30, 2010)(

9th Period
From Dec. 1, 2009
To May 31, 2010)(

8th Period
From June 1, 2009
To Nov. 30, 2009)(

7th Period
From Dec. 1, 2008
To May 31, 2009

(Millions of yen, except per unit data or where otherwise indicated)
6,424
6,986
7,744
8,178
6,375
6,610
7,652
8,063
3,942
4,027
3,841
3,899
3,195
3,249
3,010
3,025
2,482
2,959
3,903
4,279
1,274
1,774
2,711
2,999
1,282
2,076
2,710
3,157

Notes 2
and 3
Notes 3and 4Note 5Note 6Note 7)(

6th Period
From June 1, 2008
To Nov. 30, 2008)

15,393
8,349
4,352
3,270
11,041
9,343
9,342

294,562[3.8%]
82,776200,063[−0.4%]
198,781

283,867[−1.1%]
72,409200,857[−0.3%]
198,781286,901[4.0%]
72,531
201,491[5.0%]
198,781

275,769[1.3%]
70,023
191,938[−3.1%]
188,781272,105[−8.1%]
59,771
198,123[49.3%]
188,7811,282
100.0%

2,076
100.0%

2,710
100.0%

3,157
100.0%

9,342
100.0%

395,798
505,469
3,240
3,240
–

395,798
507,475
5,246
5,246
–

395,798
509,075
6,847
6,847
–

343,905
558,113
9,179
9,179
–

343,905
576,099
27,165
27,165–0.4%[0.9%]
0.6%[1.3%]
67.9%[−2.8%]
28.1%
4,416

0.6%
[1.2%]
1.0%[2.1%]
70.8%[0.6%]
25.5%
4,546

1.0%
[1.9%]
1.4%[2.7%]
70.2%[0.6%]
25.3%
5,822

1.1 %
[2.2%]
1.6%[3.2%]
69.6%[−3.2%]
25.4%
6,220

3.3%
[6.6%]
5.6%[11.3%]
72.8%[28.0%]
22.0%
6,304

33
324
182,548.82
95.9%
1,236
364

31
298
174,928.31
85.7%
1,185
568

30
288
171,951.76
92.8%
1,180
302

30
294
172,135.20
97.7%
1,182
538

30
294
172,429.29
97.6%
1,225
441

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 6th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 7th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 8th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 9th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 10th Fiscal Period are the annualized figures calculated based on 183 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − property-related expenses+ Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (former DA Office Investment Corporation; the “Investment Corporation”)
was established on July 11, 2005 in accordance with the Act on Investment Trusts and Investment
Corporations (Act No. 198 of 1951; including amendments thereto) with K.K. daVinci Select (the “AssetManager”; currently, Daiwa Real Estate Asset Management Co., Ltd.) as the organizer. After its
establishment, the Investment Corporation implemented an additional issuance of investment units through apublic offering (99,600 units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (“TSE”)
Real Estate Investment Trust Section (securities code: 8976) on the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition prices),
subsequent activities, such as the additional acquisition of properties and replacement of portfolio properties,
resulted in the assets under management amounting to 278,195 million yen(sum total of acquisition prices) asof the last day of November 2010.
The Investment Corporation strives to secure stable revenues and maximize returns for unitholders basedon a clear portfolio development policy of specializing in investment in office buildings, with a particular focus
on investment in A Class buildings (refers to buildings with a total floor area of 30,000m2 or more) and B
Class buildings (refers to buildings with a total floor area of 2,000m2 or more, but less than 30,000m2)
situated in downtown Tokyo, as well as through dedicated efforts to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from June, 1 2010 to November, 30 2010)
Although the Japanese economy is on the road to steady recovery in the fiscal period under review (10thFiscal Period (from June 1, 2010 to November 31, 2010)), the improvement reached a ceiling in the latter
half. However, the turmoil stemming from the Greece Crisis has settled, the sharp appreciation of the yen
against the dollar caused exports to dwindle in the latter half, and also corporate profits stopped
increasing. Personal consumption has been impacted by the poor growth in durable goods sales broughton by the end of tax reductions on automobiles. On the other hand, some glimmers of hope were seen,such as capital investment maintaining its leaps in growth and the unemployment rate showing slightsigns of an end to its recent continual rise.
The office leasing market (Tokyo) is making a break from the upward trend in vacancy rates and is on
the road to recovery, albeit moderate. This was confirmed, for example, by the downward trend in
corporate downsizing efforts to consolidate or relocate offices, as well as corporate moves to expand
floor area or newly occupy space. In the meantime, newly advertised rents are still on a downward trend.
Also rent levels at which tenants renew their lease agreements are on a downward trend due to disparities
between newly advertised rents and current rents.
In the office transaction market, easing of the lending attitude of financial institutions caused thepurchase demand by real estate companies and funds (including REITs) to increase. The number of realestate market transactions decreased and market demand showed improvement leading to real estatecompanies and funds (including REITs) acquiring properties in the beginning to the middle of the 10th
Fiscal Period. In the latter half, the volume of real estate market transactions decreased with the financial
institution’s positive attitude toward refinancing.

II. Asset Management Report 17

(B) Management Performance
In view of increasing the long-term EPS (EPS (net income per unit) after deducting gain on sales ofproperties) over the medium and long term, the Investment Corporation worked on “external growth,”
which aims to boost revenue through acquiring and selling properties, and “internal growth,” which aims
to maximize income generating from existing properties. External growth is imperative to restoring thelong-term EPS level, and so the Investment Corporation proactively engaged in property acquisition
activities and purchased “Kyodo Building (Nishi-Shimbashi)” (acquisition price: 5.0billion yen) in Augustand “Kyodo Building (Kudan Ichigo-kan)” (acquisition price: 4.0billion yen) in September.
As a result, the Investment Corporation’s assets under management as of the end of the 10th Fiscal
Period (November 30, 2010) totaled 33 properties, the sum total of acquisition prices of which amounted
to 278,195 million yen. Moreover, this results in investments in the five central wards of Tokyo, which theInvestment Corporation positions as a top priority investment area, accounting for 91.3% of the entire
portfolio (based on acquisition price).
Concerning internal growth, on the other hand, the occupancy rate at the end of the 10th Fiscal Periodin spite of the severe office leasing market conditions recovered to 95.9% through strengthening
collaboration with leasing brokers and property managers. Moreover the Investment Corporation
proactively pursue high tenant satisfaction levels by strengthening relations with tenants.
(3) Overview of Capital Procurement
On September 2, 2010 and September 30, 2010, the Investment Corporation borrowed 5,500 million yen in
total from Shinsei Bank, Ltd., The Bank of Fukuoka, Ltd. and ORIX Trust and Banki ng Corporation to increasecash on hand for prospects of future acquisition of properties. Further, on June 24, 2010, the Investment
Corporation issued investment corporation bonds of 5,000 million yen to acquire a property, etc.
In addition, contractual repayments of 41.25 million yen in total were made to Development Bank of Japan
Inc. and The Kagawa Bank, Ltd. on August 31, 2010. Moreover, a contractual repayment of 7.5 million yen
was made to The 77 bank, Ltd. on September 17, 2010 and contractual repayments of 84.375 million yen in
total were made to Sumitomo Mitsui Banking Corporation, The Sumitomo Trust and Banking Co., Ltd.,
Development Bank of Japan Inc., The Chuo Mitsui Trust and Banking Company, Limited, Taiyo Life Insurance
Company and The Gunma Bank, Ltd. on November 30, 2010.
As a result, the balance of interest-bearing liabilities outstanding as at the end of the 10th Fiscal Periodstood at 82,775.625 million yen (long-term loans payable: 74,275.625 million yen; investment corporation
bonds: 8,500 million yen). Furthermore, of long-term loans payable, the balance of the current portion ofinterest-bearing liabilities outstanding stood at 14,258.75 million yen (including 258.75 million yen incontractual repayments).
In addition, for the purpose of hedging the risks of rises in interest rates, of the loans with floating interest
rates, the interest rate has been capped for the 7,100 million yen loan whose principal repayment is due on
February 20, 2012.

18

(4) Capital Expenditures During the 10th Fiscal Period
The following summarizes the major construction works that constitute capital expenditures during the 10th
Fiscal Period. Capital expenditures amounted to 364 million yen and, besides combined with the 164 million
yen in repair expenses, totals 528 million yen in construction work implemented.
Name ofReal Estate Property(location)

PurposeConstruction
Amount Paid
(millions of yen)

PeriodShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Replacement of cold-water coil in airconditioning system on each floor

From: July. 2010
To: July. 201048

Daiwa Kodemmacho Bldg
(Chuo-ku, Tokyo)

Renovation of outer wall

From: Mar. 2010
To: July. 201026

Daiwa Ginza 1-chome Bldg
(Chuo-ku, Tokyo)

Renewal of air-conditioning system of
4~6F

From: Oct. 2010
To: Nov. 201025

Daiwa Ginza 1-chome Bldg
(Chuo-ku, Tokyo)

Renovation of common use area

From: Oct. 2010
To: Nov. 201018

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation of security camera system

From: Oct. 2010
To: Nov. 201018

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation of store under the ground

From: Oct. 2010
To: Nov. 201015

Daiwa Shimbashi 510 Bldg
(Minato-ku, Tokyo)

Refurbishment of B1F office space

From: Jun. 2010
To: Jun. 201015

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation of telephone system

From: Oct. 2010
To: Nov. 201014

Daiwa Minami–Aoyama Bldg Maintenance of mechanical parking(Minato-ku, Tokyo)
equipment

From: Oct. 2010
To: Oct. 2010

10

Other

From: Jun. 2010
To: Nov. 2010

175

Total

364

(5) Overview of Financial Performance and Distributions
As a result of the management described above, the Investment Corporation posted financial performancefor the 10th Fiscal Period of 6,424 million yen in operating revenues, 2,482 million yen in operating income,
1,274 million yen in ordinary income and 1,282 million yen in net income.
Concerning distributions, to ensure that the amount of distributions from earnings would be included in
the amount of tax-deductible expenses based on application of special provisions for taxation of corporationtax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957; including
amendments thereto; the “Special Taxation Measures Act”)), the Investment Corporation decided to distributethe entire amount of unappropriated retained earnings, excluding fractions of the distribution amount per unitthat are less than 1 yen. Accordingly, the Investment Corporation declared a distribution amount per unit of
3,240 yen.

II. Asset Management Report 19

3. Future Management Policy and Tasks(1) Investment Environment
The Japanese economy is expected to continue to be moderate for the time being. However, the impact ofsuch factors as domestic capital investment is expected to be on the road to gradual recovery, and with the
improvement of overseas economies as well as domestic and overseas economic policies centering onmonetary relaxation, the Japanese economy is expected to turn to gradual growth. According to a Tankan
survey, the yen is expected to remain strong in the exchange market and risk factors still exist in overseas
markets such as the financial crisis in Greece, Spain and Portugal, and the shift to a tight monetary policy inChina. Under such circumstances, economic prospects are darker centering on the manufacturing industry,where the possibility of shrinkage of corporate activities are concerned.
Under such prospects, though influenced by the improvement of corporate performance, with concerns
regarding the future economic recovery remaining, vacancy rate is expected to stay at high levels.
Furthermore, the newly advertised rent is expected to take time before its improvement trend appears. As awhole, disparity between newly advertised rent levels and current rent levels are decreasing and rent levels at
which tenants renew their lease agreements are expected to continue on a downward trend, but will graduallychange to leveling off.
In the office transaction market, acquisition demand by real estate companies and funds is expected tostay vigorous due to the influence of the easing of lending attitudes of financial institutions. Meanwhile, theoffice leasing market is expected to continue to show moderate signs, the volume of real estate market
transactions is expected to decrease due to such factors as the disparity between sales rates of sellers andbuyers is assumed to continue and financial institutions will encourage refinancing for properties held by realestate companies and funds.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under such office leasing market conditions, the tenant side is also expected to become more selectivewith properties. Consequently, the Investment Corporation will carry out operational management under
the following policy in an aim to enhance the competitiveness of existing properties and thereby increase
the long-term EPS over the medium and long term.
(a) Maintain and raise occupancy rates
Strive to maintain occupancy rates through the provision of office environments of high tenantsatisfaction levels by maintaining the quality of buildings and equipment and proactively implementing
renovations, etc. of common-use areas and thereby lowering vacancy risks.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium and long term through further strengthening of good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining office environments of hightenant satisfaction levels through implementing efficient operational management and reviewing
systematic construction work by optimally leveraging the economies of scale achieved fromproactively realizing external growth.

20(B) Investment Strategy for New Properties
Based on various external growth strategies, the Investment Corporation will concentrate its investment
in Tokyo, with a particular focus on A Class and B Class buildings in the five central wards of Tokyo, by
maintaining a balance with the financing and market situation.
As pipeline support, in addition to expanding its own information-sourcing channels, the Investment
Corporation will search for properties that meet its investment criteria by proactively gathering real estatetransaction market information through greater collaboration with the Asset Manager and Sponsor Groupand utilizing the Group’s extensive network of clients, partners, etc.
During the 10th Fiscal Period, the Investment Corporation acquired Kyodo Building (Nishi-Shimbashi)
and Kyodo Building (Kudan Ichigo-kan), which are situated in the five central wards of Tokyo. The
Investment Corporation believes acquisition of these properties will contribute to further stabilization andenhancement of the portfolio, and it will continue to strive to acquire properties that are in line with theinvestment strategy described above.
(C) Financial Strategy
The Investment Corporation will conduct disciplined financial management based on a medium-term
financial strategy of the following basic content.
(a) Control leverage by keeping LTV ratio levels within the range of 40% to 50% at maximum.
(b) Diversify repayment deadlines, targeting 20.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period.
(c) Aim to have long-term loans account for at least 60% to 70% of total loans.
(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount of distributions paid, separately from working capital.
While the Investment Corporation will continue to conduct disciplined financial management based on
the medium-term financial strategy, LTV ratio will be kept down at a conservative level of around 35% at
maximum in the 11th Fiscal Period.
The Investment Corporation will also continue to diversify lenders, which shall mainly be Japanesefinancial institutions.
(D) Schedule of Capital Expenditures
The following are the principal capital expenditures arising from renovation construction work, etc.
currently planned for existing portfolio properties. Please note that the amounts below include costs thatwill be recognized as expenses.
Expected Construction
Amounts (millions of yen)

Name ofReal Estate
Property(location)

PurposeScheduled
Implementation
PeriodShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renewal of machines for guards

From: Dec. 2010
To: Mar. 2011

129

–

–

Daiwa Shibaura Bldg
(Minato-ku, Tokyo)

Renovation of outer wall

From: Jan. 2011
To: Apr. 2011

50

–

–

Daiwa Onarimon Bldg
(Minato-ku, Tokyo)

Replacement of window packing

From: Jan. 2011
To: Apr. 2011

24

–

–

Amounts Total
paid
Total
during amounts
amounts current alreadypaidperiodII. Asset Management Report 21

III. Balance Sheets
As of November 30, 2010 and May 31, 2010
(Thousands of yen)

As ofNovember 30, 2010

As of
May 31, 2010

AssetsCurrent Assets:
Cash and cash equivalents [Note 6]

18,503,967

16,003,639

Tenant receivables

176,919

142,102

Consumption taxes refundable

119,735

32,530Prepaid expenses

766,503

766,104

Deferred tax assets

19

23

224,879

234,102

19,792,022

17,178,500

Land

218,730,715

212,726,824

Buildings and structures

59,307,505

55,779,330

Machinery and equipment

743,396

702,855

Tools, furniture and fixtures

68,572

43,564

Construction in progress

22,409

11,191

Other

9,759

9,759

Less: accumulated deprecation(9,608,134)(8,372,174)

Leasehold rights

4,970,291

4,970,291

274,244,513

265,871,640

1,384

1,518

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

334,656654,268

Deferred investment corporation bond issuance costs

51,03824,738Other

25,15522,427525,917816,635

294,562,452

283,866,775

Other
Total Current Assets
Investment Properties, at cost: [Notes 5 and 6]

Total Investment Properties ,net
Other Assets:
Right of trademark

Total Other Assets
Total Assets22

(Thousands of yen)

As ofNovember 30, 2010

As of
May 31, 2010

Liabilities
Current Liabilities:
Operating accounts payable

593,106

510,813

14,258,750

2,258,750

237,902

269,094795

663

Accrued consumption taxes

28,53740,751

Rent received in advance

807,721652,719

Other

176,938

150,080

16,103,749

3,882,870

Investment corporation bonds

8,500,000

3,500,000

Long-term debt [Notes 6 and 8]

60,016,875

66,650,000

Tenant security deposits

9,871,834

8,967,480

6,528

8,980

Total Long-Term Liabilities

78,395,237

79,126,460

Total Liabilities

94,498,986

83,009,330

198,780,951

198,780,951

Retained earnings

1,282,515

2,076,494

Total Unitholders’ Equity

200,063,466

200,857,445

Total Net Assets

200,063,466

200,857,445

Total Liabilities and Net Assets

294,562,452

283,866,775

Long-term debt due within one year [Notes 6 and 8]
Accounts payable – other
Income taxes payable

Total Current Liabilities
Long-Term Liabilities:

Other

Net Assets [Note 7]
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 395,798 units

III. Balance Sheets 23

IV. Statements of Income
For the six months ended November 30, 2010 and May 31, 2010
(Thousands of yen)

For the six months ended
November 30, 2010

For the six months ended
May 31, 2010

6,374,685

6,610,025

49,804375,937

6,424,489

6,985,962

3,194,661

3,248,662

Asset management fees

516,632

560,093

Asset custody fees

14,575

14,252Administrative service fees

83,79584,371

Trust fees

27,77425,567

Directors’ compensation

4,881

4,200

Other operating expenses

100,667

89,491

Total Operating Expenses

3,942,985

4,026,636

Operating Income

2,481,504

2,959,326

Interest income

1,788

4,792

Reversal of distribution payable

1,903

1,981

Other income

1,143

82

4,834

6,855

719,395

768,934

92,016–

391,405

420,565

9,867

2,868

Total Non-Operating Expenses

1,212,683

1,192,367

Ordinary Income

1,273,655

1,773,814–

45,844

9,714

257,880

9,714

303,724

1,283,369

2,077,538

Income taxes – current

987

1,075

Income taxes – deferred

4(6)

Total Income Taxes [Note 10]

991

1,069

1,282,378

2,076,469

Operating Revenues and Expenses
Operating Revenues: [Note 9]
Rental revenues
Other revenues related to property leasing
Total Operating Revenues
Operating Expenses:
Property-related expenses [Note 9]

Non-Operating Revenues and Expenses
Non-Operating Revenues:

Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation
bonds
Borrowing expenses
Other

Extraordinary Income:Settlements received
Gain on donation of investment property
Total Extraordinary Income
Income Before Income Taxes

Net Income

24

Retained Earnings Brought Forward

137

25

Retained Earnings at End of Period

1,282,515

2,076,494

IV. Statements of Income

V.

Statements of Changes inUnitholders’ Equity

For the six months ended November 30, 2010 and May 31, 2010
(Thousands of yen)

Number of
Units
Balance as of May 31, 2010

Unitholders’CapitalRetained
Earnings

Total

395,798

198,780,951

2,076,494

200,857,445

Cash dividends declared––(2,076,357)(2,076,357)

Net income––

1,282,378

1,282,378

395,798

198,780,951

1,282,515

200,063,466

Balance as of November 30, 2010

		(Thousands of yen)

Number of
Units
Balance as of November 30, 2009

Unitholders’CapitalRetained
Earnings

Total

395,798

198,780,951

2,710,054

201,491,005

Cash dividends declared––(2,710,029)(2,710,029)

Net income––

2,076,469

2,076,469

395,798

198,780,951

2,076,494

200,857,445

Balance as of May 31, 2010

The accompanying notes are an integral part of these financial statements.

V. Statements of Changes in Unitholders’ Equity 25

VI. Notes to Financial Statements
For the six months ended November 30, 2010 and May 31, 2010

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (former DA Office Investment Corporation: hereinafter, “DOI”) was formedon July 11, 2005 as an investment corporation under the Law Concerning Investment Trusts and Investment
Corporations of Japan (hereinafter, the “Investment Trust Law of Japan”) by the founder (the former daVinci
Select; presently, Daiwa Real Estate Asset Management (hereinafter, “DREAM”)).
DOI is an externally managed real estate fund, formed as an investment corporation. DREAM, as DOI’s asset
management company, is engaged in acquiring, managing, leasing, and renovating office properties. Daiwa
Securities Group Inc. currently owns 100% of DREAM.
On October 18, 2005, DOI had raised approximately ¥49,498 million through an initial public offering of units.
Those units are listed on the J-REIT section of the Tokyo Stock Exchange.
As of November 30, 2010, DOI had ownership or beneficiary interests in 33 office properties containing
approximately 182,549 square meters of rentable office space. As of November 30, 2010, DOI had leased officespace to 324 tenants engaged in a variety of businesses. The occupancy rate for the office properties wasapproximately 95.9%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (hereinafter, “Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP. Some supplementary information included in
the statutory Japanese language financial statements, but not required for fair presentation, is not presented in
the accompanying financial statements. DOI does not prepare consolidated financial statements, as DOI has no
subsidiaries.

Note 2 – Summary of Significant Accounting Policies
Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over the estimated useful lives. The
estimated useful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

2-50 years
2-22 years
3-18 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures forrepairs and maintenance which do not add to the value of a property or prolong its useful life are expensed as
incurred.

26

Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of
temporary differences between the amounts of assets and liabilities for financial statements and for income tax
purposes is recognized as deferred taxes.
Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, DOI capitalizes a portion of the real estate taxes that relate to a period from thepurchase date of each property until the end of the calendar year as part of the acquisition cost of the relevant
property. Capitalized real estate taxes amounted to ¥18 million for the period ended May 31, 2010, and ¥19
million for the period ended November 30, 2010.
Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and otheroperating revenues such as utility charge reimbursements, parking space rental revenues and other income.
Rental revenues are generally recognized on an accrual basis over the life of each lease. Utility charge
reimbursements are recognized when earned and their amounts are reasonably estimated.
Hedge Accounting
DOI conducts derivative transactions in order to hedge against risks defined in its Articles of Incorporation basedon its risk management policy. DOI uses derivative financial instruments such as interest rate caps only for the
propose of avoiding future risks of interest rate increases relating to loans, and does not enter into suchtransactions for speculative or trading purposes. Since the interest rate cap currently used qualifies for hedge
accounting and meets certain matching criteria, the cap is not recorded at fair value but rather the differential
paid or received under the cap agreement is recognized and included in interest expense. In addition,assessment of the effectiveness of the hedge has been omitted because the rate meets the matching criteria, as
permitted under the Japanese GAAP.
Accounting Treatment of Beneficiary Interests in Trust Assets Including Real Estate
For trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well as
all income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheet andincome statement accounts.
Consumption Taxes
Consumption taxes received and paid are not included in the accompanying statements of income.

VI. Notes to Financial Statements 27

Note 3 – Change in Accounting Policy
Adoption of Accounting Standard for Asset Retirement Obligations
From the fiscal period ended November 30, 2010, DOI adopted the “Accounting Standard for Asset Retirement
Obligations” (Accounting Standards Board of Japan (hereinafter, “ASBJ”) Statement No. 18 issued on March 31,2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21
issued on March 31, 2008). There was no effect on DOI’s revenues and expenses.

Note 4 – Change in Presentation
In the statements of income, “Interest expense on investment corporation bonds”, which used to be included in“Interest expense” until the fiscal period ended May 31, 2010, have been presented as a separate accountbecause of materiality.
The amounts of “Interest expense” and “Interest expense on investment corporation bonds” were as follows
if they were recorded as separate accounts at the fiscal period ended May 31, 2010.
Interest expense					Interest expense on investment corporation bonds¥716,335 thousand¥52,599 thousand

Note 5 – Schedule of Tangible Assets of Investment Properties
Investment properties as of November 30, 2010 and May 31, 2010 consisted of the following:(Thousands of yen)

As of November 30, 201028

As of May 31, 2010

Acquisition
costs

Accumulated
depreciation

Book value

Acquisition
costs

Accumulated
depreciation

Book valueLand

218,730,715–

218,730,715

212,726,824–

212,726,824

Buildings andstructures

59,307,505(9,354,563)

49,952,942

55,779,330(8,154,652)

47,624,678

Machinery andequipment

743,396(225,280)

518,116

702,855(193,111)

509,744

Tools, furniture andfixtures68,572(18,532)

50,04043,564(14,652)

28,912

Construction inprogress

22,409–22,409

11,191–

11,191

Other

9,759

(9,759)–9,759(9,759)–

Total

278,882,356(9,608,134)

269,274,222

269,273,523(8,372,174)

260,901,349

Note 6 – Schedule of Pledged Assets and Secured Liabilities
Pledged assets and secured liabilities as of November 30, 2010 and May 31, 2010 consisted of the following:
Pledged assets(Thousands of yen)

As ofNovember 30, 2010
Cash and cash equivalents
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Construction in progress
Leasehold rights
Total

As of
May 31, 2010

4,693,237
190,766,118
42,554,889
459,649
44,667
22,3744,970,291
243,511,225–
190,766,118
43,322,750
454,356
28,568
11,1904,970,291
239,553,273

Secured liabilities(Thousands of yen)

As ofNovember 30, 2010
Long-term debt due within one year
Long-term debt
Total

As of
May 31, 2010

14,258,750
54,516,875
68,775,625

2,258,750
66,650,000
68,908,750

Note 7 – Net Asset
DOI issues only non-par value units in accordance with the Investment Trust Law of Japan and all of the issue
prices of new units are designated as stated capital. DOI maintains at least ¥50 million as the minimum amountof net assets, as required by the Investment Trust Law of Japan.

Note 8 –Long-Term Debt
Long-Term debt as of November 30, 2010 and May 31, 2010 consisted of the following:(Thousands of yen )As ofNovember 31, 2010
Secured loans due 2011 to 2013, principally from banks and insurancecompanies with interest rates mainly ranging from 1.4% to 2.6%
Unsecured loans due in 2013 from banks with interest rates mainly
ranging from 1.1% to 1.3%
2.9% unsecured bonds due 20191.9% unsecured bonds due 2013

As of
May 31, 2010

68,775,625

68,908,750

5,500,000-

3,500,000
5,000,000
82,775,625

3,500,000
72,408,750(Note) The interest rate presented is the spot rate as of November 30, 2010.
The annual maturities of long-term debt as of November 30, 2010 were as follows:(Thousands of yen)

Due within one year
Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years

14,258,750
44,035,625
20,981,250
3,500,000
VI. Notes to Financial Statements 29

Note 9 – Operating Revenues and Property-Related Expenses
Operating revenues and property-related expenses for the periods ended November 30, 2010 and May 31, 2010
were as follows:(Thousands of yen)A.

For the six months ended
November 30, 2010

For the six months ended
May 31, 2010

6,374,685

6,610,025

49,804375,937

6,424,489

6,985,962

Consignment expenses

534,440

469,843

Utilities expenses

624,108

522,664

Taxes and dues

560,634

573,865

Non-life insurance expenses

13,107

12,946

Repair expenses

163,878

429,305

1,235,683

1,184,843

62,811

55,196

Total property-related expenses

3,194,661

3,248,662

Operating income from property leasing [A – B]

3,229,828

3,737,300

Operating revenues
Rental revenues
Other revenues related to property leasing
Total operating revenues

B.

Property-related expenses

Depreciation
Other property-related expenses
C.

Note 10 – Income Taxes
DOI is subject to income taxes in Japan. The effective tax rate on DOI’s income based on applicable Japanese
tax law was estimated as 0.08% for the period ended November 30, 2010 and 0.05 % for the period ended May
31, 2010. The following table summarizes the significant differences between the statutory tax rates and DOI’s
effective tax rates for financial statement purposes
For the six months ended
November 30, 2010

For the six months ended
May 31, 2010

Statutory tax rate

39.33%

39.33%

Deductible dividends(39.30)(39.31)Others0.05

0.03

Effective tax rate

0.08%

0.05%

DOI was established as an investment corporation under the investment Trust Law of Japan, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period
and other requirements prescribed in the Special Taxation Measures Law of Japan are met, the investment
corporation is allowed to deduct total amount of dividends in calculating its taxable income under Japanese tax
regulations.

30Note 11 –Financial Instruments(For the six months ended November 30, 2010 and May 31, 2010)(1) Status of Financial Instruments(A) Policies for financial instruments
DOI uses various financing methods (such as bank borrowings, issuance of investment corporation
bonds, equity finance) for the acquisition and repair of investment properties, the payments of dividends
and the reimbursement of bank borrowings.
As for debt finance, DOI focuses on lengthening maturities, fixing interest rates, and dispersing
maturity dates.
DOI manages surplus funds through safe and highly liquid money claims and securities (in principle,
deposits).
Derivative transactions are limited to hedge operations which hedge against interest rate risks.
(B) Contents and risk of financial instruments and policies and related risk management
DOI uses proceeds from the financing of debts and investment corporation bonds for the acquisition of
investment properties and the reimbursement of current debts and bonds. While these debts and bonds
are exposed to liquidity risk, DOI manages the risk by maintaining the LTV ratio at low levels, dispersing
maturity dates, maintaining the ratio of long-term debt to total debt at high levels, and diversifying lenders
with particular focus on domestic financial institutions.
Bank borrowings with floating interest rates are exposed to interest rate risk and the risk is controlled
by using derivative instruments (IRS).
Security deposits from tenants are exposed to liquidity risk and DOI reduces the risk by poolingfunds to a certain degree.
Surplus funds by deposits are exposed to credit risk of counterparties (financial institutions) and aremanaged by limiting the terms to short durations.
(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their market price. The fair value of financial instrumentswith no available market price is determined by using price reasonably estimated. As various factors areincorporated into these calculations, the resulting value may differ if different assumptions are provided.
Also, market risk involved in derivative financial instruments is not represented by the contract amountsof derivative financial instruments.
(2) Fair Value of Financial Instruments
The book value, fair value and difference between the two as of November 30, 2010 and May 31, 2010 are as
follows. Items for which the fair value is extremely difficult to estimate are excluded.

VI. Notes to Financial Statements 31

(As of November 30, 2010)
Cash and cash equivalents
Total assets
Long-term debt due within one year
Investment corporation bonds
Long-term debt
Total liabilities
Derivative transactions(Thousands of yen)Book Value
18,503,967
18,503,967
14,258,750
8,500,000
60,016,875
82,775,625
8,108

Fair Value
18,503,967
18,503,967
14,298,434
8,509,500
60,241,171
83,049,105
574(As of May 31, 2010)
Cash and cash equivalents
Total assets
Long-term debt due within one year
Investment corporation bonds
Long-term debt
Total liabilities
Derivative transactions

Difference––
39,6849,500
224,296
273,480(7,534)(Thousands of yen)Book Value
16,003,639
16,003,639
2,258,750
3,500,000
66,650,000
72,408,750
11,427

Fair Value
16,003,639
16,003,639
2,250,427
3,500,000
66,725,181
72,475,608
545

Difference––(8,323)–75,181
66,858(10,882)

Notes:
1. Method of fair value measurement of financial instruments
Assets(1) Cash and Cash Equivalents
As these instruments are settled within a short term, their fair value and book value are nearly identical.
Therefore their book value is assumed as their fair value.
Liabilities(1) Long-Term Debt
For long-term debt with floating interest rates, as their fair value and book value are nearly identical, theirbook value is assumed as their fair value.
For long-term debt with fixed interest rates, the fair value are based on the present value of principle andinterest cash flows discounted at the current interest rate estimated to be applied if similar new debt areentered into.
(2) Investment Corporation Bonds
The fair value of investment corporation bonds is based on observable market value, if available. In the caseof bonds with no observable market value available, book values of bonds are assumed as their fair value,
because there are floating rate bonds and reflects the market interest rates in a short-term period.
Derivatives(1) Derivatives to Which Hedge Accounting Is Not Applied
There are no derivative transactions to which hedge accounting is not applied.
(2) Derivatives to Which Hedge Accounting Is Applied

32

(As of November 30, 2010)(Thousands of yen)

Method of Hedge Accounting

Hedging
Instrument

Hedging Item

Notional
Principal
AmountSpecial treatment for interest rate
cap transaction

Interest rate cap
transaction

Long-term-debt

7,100,000(7,100,000)

Fair Value(*)
574(As of May 31, 2010)(Thousands of yen)

Method of Hedge Accounting

Hedging
Instrument

Hedging Item

Notional
Principal
Amount(over one year)

Fair Value(*)

Special treatment for interest rate
cap transaction

Interest rate cap
transaction

Long-term-debt

7,100,000(7,100,000)

545*The fair value is provided by the financial institution.

2. Financial instruments for which it is very difficult to estimate the fair value.
Tenant security deposits (\9,872 million) are not included in the above table, because they do not have amarket value and the fair value is extremely difficult to determine.
3. Redemption schedule of money claims(As of November 30, 2010)(Thousands of yen)

Within1 yearCash and cash equivalents
Total

Within2 years,
but over1 year

18,503,967
18,503,967

Within3 years,
but over2 years––

Within4 years,
but over3 years––

Within5 years,
but over4 years––(As of May 31, 2010)(Thousands of yen)

Within1 yearCash and cash equivalents
Total

–
–

Within2 years,
but over1 year

16,003,639
16,003,639

Within3 years,
but over2 years––

Within4 years,
but over3 years––

Within5 years,
but over4 years––––

4. Redemption schedule of investment corporation bonds and long-term debt
(As of November 30, 2010)(Thousands of yen)

Within3 years,
but over2 years

Within4 years,
but over3 years

Within5 years,
but over4 years

Long-term debt due within one year 14,258,750––
Investment corporation bonds–– 5,000,000
Long-term debt
– 44,035,625 15,981,250
Total
14,258,750 44,035,625 20,981,250

–
–
–
–

–
–
–
–

Within1 yearWithin2 years,
but over1 year(As of May 31, 2010)–
3,500,000–
3,500,000(Thousands of yen)

Within3 years,
but over2 years

Within4 years,
but over3 years

Within5 years,
but over4 years

Long-term debt due within one year 2,258,750––
Investment corporation bonds–––
Long-term debt
– 38,958,750 22,691,250
Total
2,258,750 38,958,750 22,691,250––
5,000,000
5,000,000––––

Within1 yearWithin2 years,
but over1 year–3,500,000–
3,500,000

VI. Notes to Financial Statements 33

Note 12 – Fair Value of Investment Properties(June 1, 2010 - November 30, 2010)
The book value and fair value of investment properties in the balance sheets are as follows:(Thousands of yen)Book Value
Balance at end of
May 31, 2010
265,860,150

Amount of increase(decrease)during current period(*1)
8,359,750

Balance at end of
November 30, 2010

Fair value at end of
November 30, 2010

274,219,900

242,859,000(December 1, 2009 - May 31, 2010)*Effective from the fiscal year ended May 31, 2010, DOI adopted the “Accounting Standard for Disclosures about
Fair Value of Investment and Rental Property” (ASBJ Statement No. 20 issued on November 28, 2008) and the“Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Guidance No.
23 issued on November 28, 2008) for the years ending on or after May 31, 2010.
The book value and fair value of investment properties in the balance sheets were as follows:(Thousands of yen)Book Value
Balance at end of
November 30, 2009
262,260,120

Amount of increase(decrease)during period(*2)
3,600,030

Balance at end of
May 31, 2010
265,860,150

Fair value at end of
May 31, 2010
236,653,000(Note 1) The book value is the amount after accumulated depreciation is deducted from the cost of acquisition.
(Note 2) Significant changes(*1)Of the amount of increase (decrease) during current period, the amount of increase is mainly attributable to the acquisition of the
Kyodo Building (Nishi-Shimbashi) (5,000 million yen) and the Kyodo Building (Kudan Ichigo-kan) (4,000 million yen), and the amountof decrease is mainly attributable to depreciation (1,236 million yen).
(*2)Of the amount of increase (decrease) during period, the amount of increase is mainly attributable to the acquisition of the ORIX
Jimbo-cho Building (4,150 million yen) and the amount of decrease is mainly attributable to depreciation (1,185 million yen).
(Note 3) The fair values at end of November 30, 2010 and May 31, 2010 show the sum of appraisal values estimated by external real estateappraisers.

The income (loss) related to investment properties for the period ended November 30, 2010 and May 31, 2010
are disclosed in Note 9.

34

Note 13 – Transactions with Related Parties(June 1, 2010 - November 30, 2010)(1) Parent Company, Major Corporate Unitholders and Others
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting rights, etc. heldby related party (held in DOI)
Relationship with related party
Nature of transaction
Amount of transaction (thousands of yen)Account
Balance at end of period (thousands of yen)

Other affiliated company
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3billion yen
Holding company
13.11% directly held in DOI 15.16% indirectly held in DOI
Provision of capital
Payment of interest expense on investment corporation
bonds (Note 1)
51,286
Investment corporation
Other (current liabilities)bonds
3,500,000
18,649(Note 1) Conditions of the investment corporation bonds were decided by analyzing the spread of similar bonds, the spread difference between
senior bonds and subordinated bonds, and the track record of similar bonds.

(2) Subsidiaries and Related Companies, and Others
Not applicable.
(3) Companies, etc. with the Same Parent Company and Subsidiaries, etc. of Other Affiliated Companies
Not applicable.
(4) Directors and Major Unitholders, and Others
Not applicable.
(December 1, 2009 - May 31, 2010)(1) Parent Company, Major Corporate Unitholders and Others
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting rights, etc. heldby related party (held in DOI)

Other affiliated company
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3billion yen
Holding company

Relationship with related party

Provision of capital
Payment of interest expenses on investment corporation
bonds (Note 2)
52,599Investment corporation
Other(current
liabilities)bonds
3,500,000
21,240Nature of transaction
Amount of transaction (thousands of yen)Account
Balance at end of period (thousands of yen)

3.11% directly held in DOI [20.21%](Note 1)(Note 1)

The ratio of voting rights owned by the other party who agrees to exercise voting rights as with the party is presented separately in [ ].

(Note 2)

Conditions of the investment corporation bonds were decided by analyzing the spread of similar bonds, the spread difference
between senior bonds and subordinated bonds, and the track record of similar bonds.

VI. Notes to Financial Statements 35

(2) Subsidiaries and Related Companies, and Others
Not applicable.
(3) Companies, etc. with the Same Parent Company and Subsidiaries, etc. of Other Affiliated Companies
Not applicable.
(4) Directors and Major Unitholders, and Others
Not applicable.

Note 14 – Per Unit Information
Information about net income per unit for the periods ended November 30, 2010 and May 31, 2010 and net
assets per unit as of November 30, 2010 and May 31, 2010 were as follows. The computation of net income perunit is based on the weighted average number of units outstanding during the period. The computation of net
assets per unit is based on the number of units outstanding at each period end.
As of
November 30, 2010

As of
May 31, 2010

Net asset value per unit

505,469 yen

507,475 yen

Net income per unit

3,239.98 yen

5,246.28 yen

Net income per unit was calculated by dividing the net income by the daily weighted average number ofinvestment units issued and outstanding. The diluted net income per unit is not stated as there are no diluted
investment units.
(Note) The basis for calculating the net income per unit is as follows.

As ofNovember 30, 2010
Net income (thousands of yen)

1,282,378

2,076,469

Amount not available to ordinary unitholders(thousands of yen)––

Net income available to ordinary unitholders(thousands of yen)

1,282,378

2,076,469

Average number of units during period (units)395,798

395,798

Note 15 – Significant Subsequent Events
Not applicable.

36

As of
May 31, 2010

VII. Independent Auditors’ ReportVII. Independent Auditors’ Report 37

VIII. Statements of Cash Flows[Information Only]
For the six months ended November 30, 2010 and May 31, 2010
(Thousands of yen)

For the six months
ended
November 30, 2010

For the six months
ended
May 31, 2010

Income before income taxes

1,283,369

2,077,538

Depreciation and amortization

1,237,420

1,184,843

7,867

2,868

Interest expense

811,411

768,934(Increase) Decrease in tenant receivables(34,818)

51,871

Increase (Decrease) in accounts payable(41,612)(151,031)

Increase (Decrease) in rent received in advance

155,002(54,096)

Cash payments of interest expense(770,028)(743,715)(Increase) Decrease in consumption taxes refundable(87,205)(32,530)

Other, net

290,971

89,2652,852,377

3,193,947(9,506,408)(4,582,664)(7,374)–

Proceeds from tenant security deposits

1,441,683

671,652

Payments for tenant security deposits(537,329)(2,667,475)(8,609,428)(6,578,487)

Proceeds from long-term debt

5,500,000

5,500,000

Repayments of long-term debt

(133,125)(5,621,875)

Proceeds from investment corporation bonds

4,965,834–

Payment of dividends(2,075,330)(2,712,310)

Net Cash Provided by ( Used in ) Financing Activities

8,257,379(2,834,185)

Net Change in Cash and Cash Equivalents

2,500,328(6,218,725)

Cash and Cash Equivalents at Beginning of Period

16,003,639

22,222,364

Cash and Cash Equivalents at End of Period

18,503,967

16,003,639

Cash Flows from Operating Activities:

Amortization of bond issuance costs

Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Payments for purchases of intangible assets

Net Cash Used in Investing Activities
Cash Flows from Financing Activities:

The statements of cash flows are not audited by any independent auditor.
Summary of Significant Accounting Policies [Information Only]
Cash and Cash Equivalents
DOI considers all highly liquid investments with original maturity of three months or less to be cash and cash
equivalents.

38

VIII. Statements of Cash Flows [Information Only]IX. Investor Information
Investor Memo
End of fiscal period
General Meeting of Unitholders
Date for finalizing Unitholders with voting rights for
the General Meeting of Unitholders
Reference date for finalizing payment of distributions
Listed financial instruments exchange
Newspaper in which notice is posted
Manager of Unitholder Registry, etc.
Office handling administrative affairs
Service counterMay 31 and November 30 of each year
Held at least once every two years
Date publicly announced beforehand
May 31 and November 30 of each year (distributions are paid within three months of this reference date)Tokyo Stock Exchange (securities code: 8976)
Nihon Keizai Shimbun
The Chuo Mitsui Trust and Banking Co., Ltd., 3-33-1 Shiba, Minato-ku, Tokyo 105-8574
Transfer Agency Department of The Chuo Mitsui Trust and Banking Co., Ltd., 2-8-4 Izumi,
Suginami-ku, Tokyo 168-0063 Phone 0120-78-2031 (toll-free)
All branches of The Chuo Mitsui Trust and Banking nationwide and the head office and branches
nationwide of Japan Securities Agents, Ltd.

IR Calendar
January 13, 2011 ・Announcement of financial resultsfor period ended in November 2010
February 10, 2011 ・Sending of Japanese version
Business Report for 10th Fiscal
Period (Statement of Financial
Performance)
February 14, 2011 ・Start paying distributions for period
ended in November 2010

November
End of fiscal period

January
February

AugustAugust 2011

・Sending of Japanese version Business
Report for 11th Fiscal Period(Statement of Financial Performance)

August 2011

・Start paying distributions for period
ending in May 2011

July 2011

・Announcement of financial results forperiod ended in May 2011

July
May
End of fiscal period

Provision of Information via Website
Daiwa Office Investment Corporation conducts information distribution via its website as an important tool for IR activities. Efforts are being
made to eliminate time lags between updating the Japanese website and English website, while providing the same content in both
January 13, 2011 ・Announcement of financial results
languages. The website will be continually enhanced and enriched so that the current situation and future strategies of Daiwa
forOfficeperiod ended in November 2011
Investment Corporation are communicated clearly.

Daiwa Office Investment Corporation

http://www.daiwa-office.co.jp/en/

February 10, 2011 ・Sending of Japanese version
Business Report for 10th Fiscal
Period (semi-annual report)
February 14, 2011 ・Start paying distributions for period
ended in November 2010

January

November
End of fiscal period

February

Important information is distributed via
e-mail. Please access and follow the simple
Auguststeps if you wish to receive our IR mail
July
Delivery Service.
May
End of fiscal period

July 2011

・Announcement of financial results forperiod ended in May 2011

The slideshow of the Earnings
Announcement for the 10th Fiscal Period in
August 2011 ・Sending of Japanese version BusinessHTML format. Please accessReport
to view.
for 11th Fiscal Period(semi-annual report)

August 2011

・Start paying distributions for period
ending in May 2011

IX. Investor Information 39